ND&S Weekly Commentary 5.26.20 – Markets Cheer Vaccine News

May 26, 2020

Equity markets rose across the board last week as investors focused on state “reopening plans” and positive initial results for Moderna’s Coronavirus vaccine. For the week, the S&P 500, DJIA and NASDAQ were up 3.27%, 3.43% and 3.48%, respectively. International equity markets also advanced with developed markets, as measured by EAFE up 3.03% and emerging markets up 0.5%. Cyclical stocks were strong last week in spite of continuing negative economic news. The best performing sectors in the S&P 500 were industrials, energy and real estate. Fixed income markets also rallied as corporate bonds and municipals rose 1.5% and 1.1% respectively for the week. The yield on the 10yr U.S. Treasury settled at 0.66%.

Economic news continued to reflect the impact from Covid-19 shutdowns. Initial jobless claims for the week of May 16 came in at 2.438 million slightly higher than consensus. Existing home sales declined 17.8% in April to a seasonally adjusted annual rate of 4.33 million, its lowest reading in a decade. On the positive side, the flash PMI for manufacturing increased to 39.8 in May from 36.1 in April and the flash PMI for services rose to 36.9 in May from 26.7 in April.

This week look for economic reports on consumer confidence, new/existing home sales and personal consumption. Investors will be hoping for signs that the reopening will have a positive social and economic impact without triggering a spike in virus cases.

“And if words cannot repay the debt we owe these men, surely with our actions we must strive to keep faith with them and with the vision that led them to battle and to final sacrifice.” – Ronald Reagan